2 - Economic Decision Making Definitions Flashcards
Bounded Rationality
The idea that cognitive decision making of humans can’t be fully rational, because of limits such as time.
Bounded Self - Control.
Individuals have limits in their ability to resist immediate gratification, making decisions that align with their long term goals.
Rules of Thumb
A piece of practical advice providing simplified rules which apply in most situations.
Anchoring
The use of irrelevant information to help estimate an unknown piece of information, as a reference point.
Availability Bias
Overestimating the likelihood of something happening because a similar event has happened recently.
Social Norms
The idea that many of our decisions are social decisions, and happen in networks.
Altruism and Fairness
Making a decision which is selfless, doing something to benefit others.
Choice Architecture
The scenario in which someone makes a decision is carefully designed to try and influence their decision.
Framing
The idea that individuals make decisions based on how an issue is presented, or framed, rather than on the faults presented.
Nudges
A way to change someone’s behaviour in an easy and low-cost way, without reducing the number of options available.
Default Choice
The option that a consumer receives by selecting nothing.
Mandated Choice
A situation in which people must make a decision in advance with respect to whether they wish to participate in a particular action.
Restricted Choice
Intentionally limiting the available options to guide individuals towards making a particular choice.
